Your home is outdated and you’re trying to decide if renovating is your best option, or if you should sell and move to a new property.
I understand your dilemma – my wife and I faced a similar situation many years ago when we lived in the UK.
Our property needed modernising and we had to decide whether to renovate it or sell it and move on.
In the end, we decided to renovate because we liked where we lived and we thought we could add value.
As it turned out, that was the right decision because we did add value – and that value enabled us to move in to a bigger and better property a few years down the track.
There are many factors to consider when deciding whether to renovate or buy a new property.
To help you decide, here are the three important steps my wife and I followed to help us reach a decision…
Step 1: Be really clear about the type of property you want.
This requires you to think about your immediate and future requirements.
For instance, what will your family needs be in a year, two years or five years?
Where will you be working?
What sort of job will you have?
Do you want to be close to family and friends?
These types of questions will help you decide the type of property you need and its ideal location.
For example, you might want or need a property that is bigger, has a better garden or view, is in a different suburb or position – like closer to shops, transport and other amenities, has a better floor plan and even a different interior design.
Whatever your needs, you should compare and contrast them with your current home to help identify any major gaps or shortcomings.
Step 2: Compare property values in your street and suburb.
This is a very important step.
This goes to the heart of assessing how your property stacks up against everyone else’s, and whether there are any major price differentials.
If there are differences you need to find out why.
For instance, it could be the issue of your home being outdated, or that it is on a smaller block, or a host of other reasons.
This is where talking to local selling agents and getting a free home appraisal and advice can be really valuable.
You can also jump online and get a free property estimate, together with checking out the prices achieved on recent sales in your area, to help benchmark your own property’s value.
The reason for doing this is twofold.
Firstly, to help you decide if it’s worth putting the time, effort and money into renovating, and secondly to help reduce the likelihood of overcapitalizing – that is, spending too much on your renovation.
Step 3: Do your sums
Once you’ve completed steps one and two, it’s time to start crunching some numbers and prepare a budget.
Your budget needs to be more than a guesstimate.
You really need to bring in the experts – like a builder – to get a detailed costing of any planned renovations, as well as taking into account the full cost of buying and moving into a new property.
Remember, if you decide to sell and move, you will need to factor stamp duty, legal fees and moving costs into your budget.
You also need to assess the extent to which the proceeds of the sale of your existing property will cover the total costs of your new home.
Doing your sums is the financial side of the equation, and is all about letting you know what you can reasonably afford – which in itself may determine your best option.
As a closing thought, whether you renovate or sell, it is often a balance between what bests fits your personal lifestyle needs, what’s affordable, what’s less disruptive and what gives you the best chance of long-term capital growth.
However, if you plan to sell your property within the next one to two years, be very mindful of undertaking a major renovation project – you need to make sure you can at least recoup the cost of your investment.